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[KIEV] Ukraine said it expected "decisive" negotiations this week after it sent a fresh debt restructuring proposal to a group of its largest creditors, with the threat of a moratorium on debt payments looming.

Talks to restructure US$23 billion of Ukraine's external public debt have dragged on for more than four months over a disagreement over the necessity of a writedown on the principal of the bonds; but on Friday a source said Kiev saw this week as a deadline for a deal.

The International Monetary Fund, whose US$40 billion bailout package for Ukraine depends on Kiev making US$15 billion in savings via debt restructuring, has repeatedly urged both sides to reach an agreement quickly.

The Finance Ministry said it had sent a new proposal to the creditor group on Tuesday morning. "Given the legal considerations around timely implementation of the proposal, this week will be decisive for the negotiations. Accordingly, the ministry has called on creditors to attend at the highest level a meeting in London on Thursday,"it said.

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Ukraine has been pushed to the brink of bankruptcy by years of economic mismanagement, corruption and a conflict with pro-Russian separatists. Continued violence despite a ceasefire deal has hampered the government's efforts to get the country's finances in order.

Last week the IMF approved the second tranche of financial aid, worth US$1.7 billion, and said it would continue to lend to Ukraine even if a deal with creditors remains elusive and Kiev decides it cannot service its debt.

The Finance Ministry has threatened to halt payments if a deal is not reached soon.

A US$500 million bond matures on September 23. "They will try and find an agreement on Thursday, but if they don't I would be quite nervous about what would happen, then we are getting into a new territory," Jakob Christensen, senior economist at Exotix, told Reuters. "They (Kiev) have pressed on numerous occasions that they would look at imposing a moratorium ahead of the September issue if they could not find an agreement," he said.

Kiev insists a 'haircut' of the principal is essential, but it is unclear if its latest proposal amends its original desire for a 40 per cent writedown.

Reuters reported on Thursday that the latest proposals from creditors envisaged a 5 per cent haircut, in what seemed like a softening in their stance, although a source later said the proposal contains the possibility of no writedown if the economy picks up.

Eurobonds, which have risen steadily over the past weeks on expectations that an agreement will be reached, were trading unchanged following the Finance Ministry statement.

State-owned Oschadbank and Ukreximbank have already reached a restructuring deal with creditors, but their offers did not include a 'haircut' on the principal or coupon of bonds.